The following is a conversation that I had over on the newly revived Get Rich Slowly Forums with Jethro. He had asked a question about how to teach kids about money which then turned into a discussion about giving kids allowances. It was a very thought provoking conversation, and although it is a bit long, I thought maybe we could get some more of your thoughts on the subject as well?
Prlinkbiz:
"I must be the only one in the PF Blogosphere that doesnt believe in allowances for kids.
While I like the idea behind teaching kids how to save etc,- really the most effective way to teach kids the value of money is to have them earn it themselves.
Not one of the most successful people I know (multimillionaires) received an allowance. They all learned from an early age, if they wanted something, they were going to have to figure out how to earn the money on their own to do it. They believe this one skill has helped them succeed in life more than anything else.
Why? Because it created in them the correct mindset: if I want something in life, how can I achieve it? Instead of being trained to be dependent on someone else to give them money and things and have to constantly live with a mindset of scarcity that says I can't have the water, if I want the money.
Just my two cents for what its worth."
Jethro:
"This is all good in theory, but how do you apply it to a 4-year-old? Do you have any practical examples of how he could go out and earn money on his own?"
Prlinkbiz:
"There is nothing theory about it. I have two kids, 4 and 5. They are already grasping the idea of earning money. Maybe it is because they have watched me buy and sell, build my own businesses and invest, and see the example I set for how I earn, create and find money.
My little guys know how to sell their old toys and items to earn money for new ones. The know how to save money they come across. If they want money for something, sometimes they will ask me what they can do extra to earn it (5 year old helped me pick weeds, etc). I have friends whose kids have set lemonade stands, or even gathered neighbors extra fruit (with their permission) and sold it. There are lots of things kids can do.
Kids are very intelligent and very creative- they can figure these things out, with our teaching advice and guidance. And they will learn important life lessons that will help them be far more successful in life. They will always be the ones who see opportunity where others do not, and who do understand the value of a dollar."
Jethro:
" prlinkbiz wrote:
There is nothing theory about it. I have two kids, 4 and 5. They are already grasping the idea of earning money. Maybe it is because they have watched me buy and sell, build my own businesses and invest, and see the example I set for how I earn, create and find money.
My little guys know how to sell their old toys and items to earn money for new ones.
If a child purchased that 'old toy' to begin with, then I can see that being a good money lesson. But if they are selling toys they got as gifts, then I don't see how this is really applicable. In order for it to be a real entrepreneurial experience, they need to have some form of capital invested in the initial purchase, and need to turn some kind of profit on the deal. If anything, I would see this as a lesson in depreciation.
prlinkbiz wrote:
The know how to save money they come across.
How does one 'come across' money?
prlinkbiz wrote:
If they want money for something, sometimes they will ask me what they can do extra to earn it (5 year old helped me pick weeds, etc).
I would consider this to be allowance, as part of my allowance plan would incorporate 'earning' money by doing certain jobs around the house. Some would say that doing jobs or chores around the house still does not qualify as anything other than 'allowance'."
Prlinkbiz:
"I think this is a good conversation.
You're getting a little nit picky with the whole entrepreneur thing. As an entrepeneur, I have to disagree with you. The key is in being able to to sell, (and make money on) anything. (and see the opportunity in the first place)
Kids come across money in many different ways: birthdays, find it on the ground, holidays, etc.
I don't feel household chores are something anyone should get paid for. Nobody pays me to do the laundry, dishes, etc, why should kids get paid for contributing as the rest of the family does, and cleaning up after themselves?
However, going above and beyond, that I think should be rewarded; money in exhange for time. Hence the money to help with the weeds. And believe me, that is not an every week occurance. I used that as an opportunity to show my five year old how if I hired him to help with the weeds for two dollars, he could then hire his little brother for one dollar, and have his brother do the work, learning to leverage OPT (he didn't do it, but hopefully the idea will stick)."
Jethro:
"The reason I'm being a nit-picky is because of these comments...
prlinkbiz wrote:
While I like the idea behind teaching kids how to save etc,- really the most effective way to teach kids the value of money is to have them earn it themselves.
Not one of the most successful people I know (multimillionaires) received an allowance. They all learned from an early age, if they wanted something, they were going to have to figure out how to earn the money on their own to do it. They believe this one skill has helped them succeed in life more than anything else
At some point, a child has to use capital that they did not earn (either in the form of allowance, a monetary gift, or materials purchased by a parent) in order to earn more money. At some point, something has to be given to them (when they are too young to go out and mow lawns, etc).
Maybe the term 'allowance' should be replaced with something more PC like 'Children's Financial Learning Plan'. In my mind, the initial 'allowance', or CFLP (started at a young age) would be used to teach my children the basics about money -- spending, saving, giving. As they got older, the base 'salary' or 'allowance' would become a smaller percentage of the overall CFLP, and more emphasis would be placed on them actually earning the money themselves, either through extra credit chores (like pulling weeds), or though things like selling lemonade on the street. Eventually, I would hope that they could earn money on their own doing things like mowing lawns for neighbors, washing cars, etc.
I also think that there is some value in teaching things like 'you can have a soda pop or a you can have a dollar', as it teaches kids the correlation between wants and needs, and gives them a real world example of what unnecessary spending can do to your cash supply. I had thought of possibly making them use money from their CFLP to purchase unnecessary items (like a soda pop at a restaurant). Of course, since my kids won't touch soda pop anyways, this example is all hypothetical. Very Happy
Thanks for your input, BTW; you've got me thinking here. (cool face)"
Prlinkbiz:
"Well, I've got myself thinking too! I don't know the "right way", who does? I just know that I was a spoiled brat. My dad felt guilty about not being there, so financially I never had to worry about anything. Neither one of my parents really knew about money mangement.
The best thing that happened was my dad after college (that I did work to pay for, while he paid for necessities each month-$75!) told me, "You are on your own- don't ask me for anything else."
From then on I had to figure out how to survive. I have had to learn a lot of things as a grown up that I wished I learned as a kid. I have actively looked for successful business owners and investors and have learned as much as I can from them.
As I mentioned, I can think of five close multi-millionaire friends right now (how they are my friends I don't know- I think they keep me around for entertainment!). None of them had an allowance or money in their family growing up. All of them knew, if they wanted or even needed in some cases, they were the ones who had to make it happen. So they had to try twice as hard, be twice as creative, etc.
Emergence through emergency.
While my first instinct as a mom is to spoil the kids I love so much, perhaps I need to with hold more than I wish, in order to teach my two boys how to survive in this world as men- not only survive but thrive.
These are just my thoughts!"
Comments (7)
Hi,
Your conversation about kids and money is great, especially since you have young children. Mine are now 27 and 28 and I started when they were 8 and 9.
I can say that by the time they were 14 years old, they were totally financially independent. We provided lots of love, a home and food, but name brand clothing and "stuff" was not on the family survival list.
At ages 8 & 9 my husband had just lost his 6th job in as many years.
I realized that my kids needed to appreciate the value of money, and that it did not grow on trees. they also needed to learn to stick to projects and not give up.
What started this "hunt for cash" was an invitation to visit my cousin and go to Disneyland. We could only afford the gasoline to get there (250 miles). We had a free place to stay and my cousin had free tickets into Disneyland but I knew the "Mom can I have this, and Mom can I have that" was going to cost BIG BUCKS. So we started recycling aluminum cans.
In brief, the kids got really creative and were able to collect enough cans to raise $30 each.
The grandparents were in on this too, so they chipped in another $5.00 each. They could have easily given them $20 each, but realized the educational value of what we were trying to do.
That "Disney Experience" was one of the best financial lessons we could have planned. My son, who now has his MBA remembers walking into The Magic Kingdom and immediately asked for money for an ice cream bar. The look on his face when he returned was priceless. That ONE purchase cost him $2. He was stunned.
We had a wonderful day and from that moment on, both children began to manage their money down to the last 50 cents. My daughter spent her last bit of money on Mouse Ears!
We returned home and within 4 months, my son had recycled enough aluminum cans to buy a bicycle. It was his prize possession.
By age 11 and 12 I opened up a "Minors Account" for each child. They received their own check books and I had to co-sign with them on each check that they wrote. They found out quickly that having checks in the check book didn't mean that there was money in the account!
Both children bought their first cars, car insurance and put themselves through college. They both have their Masters Degrees, and are happily married.
Teaching them the value of money and how to earn it at an early age has been one of the most valuable gifts I have given my children.
I guess I just felt motivated after hearing so many spoiled kids at the store yelling at their parents for not buying them stuff. I was NOT going to be one of those parents and it worked.
Posted by LaurieL | April 17, 2007 12:21 PM
Posted on April 17, 2007 12:21
I always thought an allowance was your payment for doing your chores. Therefore you earn an allowance, your folks don't just fork it over. Don't do your chores, don't get an allowance.
Isn't it that simple?
Posted by mapgirl | April 17, 2007 1:00 PM
Posted on April 17, 2007 13:00
Laurie- thanks for sharing!
Mapgirl, I don't think it is as simple as getting paid for chores. I don't get paid for things I have to do around the house, and as part of the family, kids should learn to pull their share too. Things over and above could be rewarded. But it isn't that simple when trying to figure out how to prepare kids to understand the vlaue of money and be prepared for the real world you know?
Posted by prlinkbiz | April 17, 2007 4:38 PM
Posted on April 17, 2007 16:38
I think that some chores are difficult for kids and it's probably the only thing fitted for their age. It's true that we grown ups don't get paid for doing chore but maids and housekeepers do.
Posted by Gina | April 19, 2007 3:41 AM
Posted on April 19, 2007 03:41
This is a great discussion!
I am having the same probleml. I don't feel I should be have to pay my kids to do things around the house, but I also feel they should have money to manage. I used to receive an allowance, but once I was old enough to do things I'd get paid for it stopped (we have a grape farm & I would work year round, I'd do books for my Dad, we'd tie grapes, pull brush, drive tractor).
The problem was I always seemed to have enough $ back then to do everything I wanted, go to dances, buy stuff (Mall stuff) & save $ for college. So I just started expecting it (money) to be there because it's not like I don't work hard, I just have more expenses.
So where do I draw the line with my kids, what will work, what won't? Do you count the money you give them for their expenses (like lunch $) how much control do you give them over how they spend their money? How do you deal with 2 sets of Grandparents who don't think twice about letting them have whatever they want, when the only live 5 minutes away & see them regularly?
It seems to just lead to more questions, differences & opinions. Guess I'll just continue gathering info & do what I'm doing now, until something better comes along :D.
Posted by Lisa Knight | April 19, 2007 8:35 AM
Posted on April 19, 2007 08:35
This is a great conversation. I believe that kids need to know the value of money at an early age to be wise later on. I am not sure if the idea applies to every kid. I guess it's how parents teach kids the right value.
Posted by Marie | April 19, 2007 8:31 PM
Posted on April 19, 2007 20:31
This is a great topic... infact I wrote about it a few months ago on my blog! This is what I wrote...
When ever we are making a decision regarding the kids, I try to step back and look at the larger picure… how does this fit in with what we want to teach the kids about how to live their lives responsibly? When thinking about Allowance - this is what comes to me:
What does giving an allowance teach? Answer: Entitlement.
Giving an allowance teaches kids that they are entitled to receive money - even if they have done nothing to that end. This is not a lesson I wish to pass on to my children. Kids that grow up with a sense of entitlement end up being adults that are victims. Victim of the downsize. Victim of the bankrupt social security system. Victim of a bankrupt pension plan. I don’t want my kids growing up thinking they are entitled to having someone else (government, spouse, company) take care of them. They need to learn to take care of themselves. Therefore, we have decided not to give our children allowances. We will focus on giving them the tools and skills they need to bring money into their lives when they need money.
Posted by AroundTheWorld | April 20, 2007 10:06 PM
Posted on April 20, 2007 22:06